85Test bank for financial accounting a business process approach 3rd

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85Test Bank for Financial Accounting A Business

Process Approach 3rd

Edition by Reimers Multiple Choice Questions-Page 1

Double taxation occurs because businesses pay

1. A sales tax and income tax

2. B property taxes and income taxes

3. C taxes on net income, and owners pay taxes on the remaining net income distributed as dividends

4. D social security taxes for employees, and employees also pay the same amount for themselves

Which of the following is true about a corporation?

1. A Corporations must have a minimum of two or more shareholders

2. B Each individual shareholder has individual legal responsibility for the

corporation's actions

3. C Corporations are exempt from taxes; however, the shareholders are

required to pay taxes on dividends received

4. D Managers of corporations can be held responsible for the actions of the corporation

For which organization are the personal assets of the owners at risk?

1. A sole proprietorship

2. B partnership

3. C corporation

4. D sole proprietorship and partnership

For which organization are owners typically separate from

managers and not involved in the day-to-day operations, sometimes resulting in managers making decisions that are not in the best

interest of the owner(s.?

2. B partnership

3. C corporation

For which organization is ownership represented by shares of

stock?

2. B partnership

3. C corporation

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The outputs of a firm are its

1. A capital contributions

2. B services provided to customers

3. C delivery of products to customers

4. D Two or more of these are correct

The United Way is an example of a

2. B partnership

3. C corporation

4. D not-for-profit

The law firm of Doolittle and Baroque is an example of a firm

1. A service

2. B merchandising

3. C manufacturing

4. D financial services

Which of these businesses pays federal income taxes on its

income?

1. A corporation

2. B partnership

3. C sole proprietorship

4. D Two of these are correct

Limited legal liability for owners is a characteristic of

1. A sole proprietorships

2. B partnerships

3. C corporations

4. D not-for-profits

Corporations are

1. A for-profit businesses only

2. B manufacturers and not service organizations

3. C owned by shareholders

4. D exempt from legal liability

The owners of a corporation are called

1. A shareholders

2. B partners

3. C stockholders

4. D two or more of these

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When starting a business you should first

1. A write a business plan

2. B borrow from creditors

3. C purchase inventory

4. D become incorporated

The stock market is

1. A located in New York City

2. B the general term used to refer to all stock exchanges

3. C where the IRS is located

4. D where businesses become incorporated

A corporation

1. A is a legal entity separate from the owners

2. B is a manufacturer and not a service organization

3. C may cause unlimited liability for its shareholders

4. D provides goods or services for the sole purpose of helping people

For which organization is there double taxation?

2. B partnership

3. C corporation

4. D sole proprietorship, partnership and corporation

The ownership structure of a business includes the following forms

1. A individual, group, and corporate

2. B sole proprietorship, partnership, and corporation

3. C service, manufacturing, and financial

4. D debtors, creditors, and owners

Target is an example of a firm

1. A service

2. B merchandising

3. C manufacturing

Toyota is an example of a firm

1. A service

2. B merchandising

3. C manufacturing

Ira Roth, CPA, is an example of a

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2. B partnership

3. C corporation

4. D not-for-profit

Which organization should keep its financial records separate from the personal financial affairs of the owner(s.?

2. B partnership

3. C corporation

4. D All of these are correct

The governmental agency that monitors the stock market and the financial reporting of firms that trade in the market is the

1. A Financial Accounting Standards Board (FASB

2. B Internal Revenue Service (IRS

3. C Public Company Accounting Oversight Board (PCAOB

4. D Securities and Exchange Commission (SEC

A manufacturing business

1. A will lend money to customers

2. B buys goods for resale

3. C provides services to its customers

4. D makes the products it sells

Which of the following is legally a separate entity from its owner(s.?

2. B partnership

3. C corporation

Advantages of the corporate form of business organization include

1. A double taxation

2. B limited liability for shareholders

3. C separation of ownership and management

4. D Two or more of these are correct

A partnership

1. A is a business owned by two or more individuals

2. B has owners who are legally liable for everything the company does

3. C may be organized under a partnership agreement

4. D is all of these

Huntington Bank is an example of a firm

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1. A service

2. B merchandising

3. C manufacturing

Which of the following is true about a sole proprietorship?

1. A A sole proprietorship is a company owned by two or more individuals

2. B The owner's liability is limited to the amounts invested in the business

3. C Income from a sole proprietorship is distributed to the owner in the form of

a dividend

4. D The income from a sole proprietorship is taxed on the owner's personal income tax return

Stock sold for the first time is called

1. A issued

2. B traded

3. C capital

4. D dividends

The four types of business are

1. A service, wholesale, retail, and financial

2. B for profit, nonprofit, wholesale, and retail

3. C service, merchandising, manufacturing, and financial services

4. D financial, manufacturing, service, and wholesale

The two types of merchandising businesses include

1. A wholesale and retail

2. B service and financial

3. C manufacturing and retail

4. D service and wholesale

Doolittle & Daley, attorneys at law, is an example of a

2. B partnership

3. C corporation

4. D not-for-profit

Which type of business organization exposes its owner(s to

unlimited liability?

1. A corporation

2. B partnership

Target is an example of a

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2. B partnership

3. C corporation

4. D not-for-profit

A business form in which the partners are not personally liable for the malpractice of any of the other partners is called a

1. A corporation

2. B limited liability partnership

3. C modified sole proprietorship

4. D partnership

A business in the form of a sole proprietorship

1. A is separate and distinct from its owner

2. B is a separate legal entity

3. C files its own tax return

4. D is a company with a single owner

Disadvantages of the corporate form of business organization include

1. A double taxation

2. B limited liability for shareholders

3. C separation of ownership and management

Stock may be purchased

1. A on a stock exchange

2. B on the internet

3. C from a stockbroker

4. D from more than one of these

Financial services companies

1. A deal in services related to money

2. B sell insurance to their customers

3. C lend money to consumers to pay for cars and houses

The inputs of a firm include

1. A revenues

2. B liabilities

3. C inventory and supplies

A service company

1. A is a wholesale business

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2. B manufactures goods

3. C is a retail business

4. D None of these are correct

A partnership agreement

1. A exempts partners from unlimited liability

2. B establishes the partnership as a separate legal entity

3. C details how much work partners will do and how they will split up the profits

4. D defines how many shares of stock the partnership may sell to investors

Which type of business organization finds it easiest to raise large amounts of capital?

1. A corporation

2. B partnership

Dell Inc.'s distribution of earnings to owners is called dividends Dell must be a

2. B partnership

3. C corporation

4. D sole proprietorship or partnership

85 Free Test Bank for Financial Accounting A Business Process Approach 3rd Edition by Reimers Multiple

Choice Questions-Page 2

Comparative balance sheets

1. A include balances of two consecutive years

2. B include gross profit and operating income

3. C report financial ratios for the current year which are compared to the prior year's

4. D report revenues for both the current and previous years

Audited financial statements have been examined by

1. A owners

2. B Certified Public Accountants (CPAs

3. C Internal Revenue Service (IRS agents

4. D Securities and Exchange Commission (SEC examiners

Sara contributes $5,000 of her own money to start her business, Team Shirts, Inc From Team Shirts' perspective, it

1. A gets cash and gives up stock

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2. B gets stock and gives up cash

3. C gets ownership and gives up contributed capital

4. D is an operating activity

For the month of June, Team Shirts, Inc., received $6,000 in

contributed capital, $3,000 in sales revenue, paid $2,000 in

expenses, and $500 in dividends Its net income was

1. A $9,000

2. B $7,000

3. C $1,000

4. D $500

The statement of cash flows

1. A describes the financial situation of a company at a specific point in time

2. B is a summary of all of the revenues minus all of the expenses for an

accounting period

3. C shows the changes that took place in the amount of shareholders' equity during a period

4. D is a list of all the cash collected and cash paid during a period

The purpose of the financial statements is to provide financial

information needed by

1. A investor and creditors

2. B regulators

3. C vendors and customers

4. D all of these

The four financial statements used to report a company's financial condition include

1. A balance sheet, income statement, statement of changes in shareholders' equity, and statement of cash flows

2. B changes in balance sheet, statement of flows, statement of changes in balances, and statement of cash flows

3. C balance sheet, statement of earnings, statement of changes in

shareholders' equity, and statement of budgets

4. D income sheet, balance of earnings, statement of changes in shareholders' equity, and statement of cash flows

Using Lox Stock & Bagel Company's financial statement above, determine the amount that represents the earnings kept in the company

1. A the Cash balance

2. B $21,910

3. C $10,910

4. D $11,910

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On March 1, Team Shirts had a beginning balance in retained

earnings of $1,200 During March, Team Shirts paid $200 in

dividends and had net income of $2,000 The March 31 balance in retained earnings was

1. A $3,000

2. B $3,200

3. C $3,400

4. D $1,200

How many of a company's four financial statements report

information about the company at a specific point in time?

1. A one

2. B two

3. C three

4. D four

Mia Hero, Inc had a retained earnings balance of $7,000 on

December 31, 2011 For the year 2012, sales revenues are $15,000 and expenses are $13,000 If no dividend is declared or paid in

2012, retained earnings at December 31, 2012 equals

1. A $9,000

2. B $10,000

3. C $35,000

4. D some other amount

Net income flows from

1. A the income statement to the statement of changes in shareholders' equity

2. B the income statement to the balance sheet

3. C the balance sheet to the statement of cash flows

4. D the statement of cash flows to the income statement

In which of the following are the owners' or owner's personal assets

at risk if the business does not have enough money to pay its

liabilities?

2. B partnership

3. C corporation

A person who starts his own business is considered

1. A a manager

2. B an entrepreneur

3. C a shareholder

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4. D a capitalist

A single-step income statement

1. A is the preferred method of reporting revenues, expenses, and cash

because of the ease of preparation

2. B groups all revenues together and shows all expenses deducted from total revenue

3. C includes the subtotal Gross profit in the presentation

4. D is preferred by business owners because the information presented is timely, and thus useful

Revenues include

1. A the amount earned from providing goods to customers

2. B the amount received from borrowing

3. C the amount earned from providing services to customers

An audit opinion

1. A is a report prepared by a Certified Public Accountant (CPA indicating the financial statements have been examined

2. B is required by the Securities and Exchange Commission to accompany the financial statements of publicly-traded companies

3. C is a report prepared by the Internal Revenue Service (IRS

4. D is two or more of these

During the year, The Mane Event, Inc had sales of $300,000 and had expenses of $240,000 The owners were paid $20,000 in

dividends Net income for the year equals

1. A $90,000

2. B $60,000

3. C $50,000

4. D $40,000

The statement of changes in shareholders' equity

2. B is a summary of all of the revenues minus all of the expenses for an

accounting period

The Cash balance (b in Lox Stock & Bagel Company's financial statement above is

1. A the same as the retained earnings

2. B $39,910

3. C $3,000

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4. D $10,910

A balance sheet

2. B is a summary of all of the revenues minus all of the expenses for an accounting period

The missing name (a of Lox Stock & Bagel Company's financial statement above is the

1. A Balance sheet

2. B Income statement

3. C Statement of changes in shareholders' equity

4. D Statement of cash flows

Which of the following statements reports the line item Gross profit?

1. A the single-step income statement

2. B the multistep income statement

3. C the single-step balance sheet

4. D the multistep balance sheet

Which of the following increases retained earnings?

1. A issuance of stock

2. B revenues

3. C purchase of inventory

4. D dividends

Using Lox Stock & Bagel Company's financial statement above, determine the amount of the company's largest resource

1. A $11,910

2. B $39,910

3. C $18,000

4. D $25,000

In 2012, Baroque, Inc., a U S corporation, earned profits of

$200,000 before taxes After paying federal income taxes of 30%, all of Baroque's after-tax income was paid to its only shareholder The federal income tax rate on corporate dividends is 15% How much tax will Baroque's shareholder pay on these dividends?

1. A $21,000

2. B $30,000

3. C $60,000

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